Wandel & Goltermann GMBH & Co v Wandel Global Services Pty Ltd

REASONS FOR JUDGMENT 1 The applicants have an order for the costs of this action to be taxed in default of agreement. They now seek a further order under O 62 r 4(2)(c) that the costs be fixed at $180,000 on the basis that this is the amount which the respondents, through their solicitor, Mr Cunningham, have agreed to pay. The order is resisted by the respondents who contend that there is no such agreement and, in any event, their solicitor exceeded his authority. 2 The facts can be briefly stated. The action, which is for breach of trade mark and copyright, passing off and contravention of s 52 of the Trade Practices Act 1975 (Cth) (false and misleading conduct), is brought by the applicants against their former employee, Mr Condy, and two companies which Mr Condy established. The action is based on the respondents' use of the devise WGS within a rectangular shaped dark background. The action was settled shortly before trial on the basis that the respondents would submit to certain injunctions and pay the applicants' costs. The applicants prepared a bill of costs for taxation which claimed $266,750.66 for fees, charges and disbursements. They then offered to settle this claim and a related action which had been brought against Mr Condy in the County Court for the "all in" sum of $275,000. Mr Condy asked Mr Cunningham to negotiate a settlement of the claim for costs in the Federal Court action and the County Court action. He explained that his key objectives included "(i) a complete settlement of both the County Court and Federal Court (in relation to costs) cases" and "extended payment". Mr Cunningham spoke with Ms Meyer who was acting for the applicants. He told Ms Meyer that his client "was prepared to offer $220,000.00 to settle both the County Court and Federal Court actions payable within thirty (30) days and this was calculated on the basis of applying $180,000.00 to the Federal Court action and $40,000.00 to the County Court action." Mr Cunningham intended to convey to Ms Meyer that this constituted one offer to settle both actions and not separate offers to settle each claim. Mr Cunningham said that "[a]ll previous settlement discussions had been on the basis that both cases would be settled. During those discussions the Applicants' (sic) were put on notice that this was a non negotiable requirement of any settlement". I do not doubt that the oral offer covered both the claim for costs and the County Court action. However, following the conversation Mr Cunningham wrote two "without prejudice save as to costs" letters, one in each action. The relevant parts of the letter relating to the Federal Court action read: "We confirm that we have obtained instructions in relation to your clients' offer to resolve the Federal Court and County Court actions for the sum of $275,000.00 'all in' payable within thirty (30) days of acceptance. We are instructed by our client to reject your clients' offer and put a counter offer in the sum of $180,000.00 'all in' in respect of the Federal Court proceeding in full and final settlement of your clients' claim for costs and interest. This offer is put on the basis that our client has formed a view that a sum of approximately $120,000.00 will be taxed off your clients' claim, the great proportion of which will relate to the claim for fees charged by the US Attorney. The offer is put in accordance with the principles set out in Calderbank -v- Calderbank and in the event that your clients' (sic) do not accept our clients' offer this letter will be produced on the question of costs." The letter concerning the County Court action is in similar terms save that the amount offered was $40,000. The applicants purported to accept the offer for the costs of the Federal Court proceeding and, by their silence, to reject the offer to settle the County Court action. It is the alleged acceptance of the offer in relation to costs which is the basis of the present application. 3 In my view two separate questions arise. (1) Did the parties conclude an agreement in relation to the costs of the Federal Court action? (2) If there is an agreement, should it be enforced? As regards the first question I have formed the view that there is a concluded agreement. The offer was within Mr Cunningham's ostensible authority (see Waugh v H B Clifford and Sons Ltd [1982] Ch 374, 387) and it was not a mere accord without satisfaction (McDermott v Black (1940) 63 CLR 161, 183-5). Moreover, while it has not been disputed that during the settlement discussions Mr Cunningham made clear his wish to settle both actions, the two letters did, in terms, amount to separate offers. This may have indicated to the applicants that the respondents were embarking upon a new tactic, but I suspect that Ms Meyer believed that the provision of separate offers may have been a mistake. I note that she was not called to rebut Mr Cunningham's evidence. On the other hand, I do not have sufficient evidence before me to justify setting aside the agreement on the ground of unilateral mistake. 4 When it comes to enforcing the agreement different considerations arise. The cases show that if an action is settled by a legal adviser contrary to his instructions the court can refuse to give it effect even though the absence of authority was not known to the other side. The leading cases are collected in Harvey v Phillips (1956) 95 CLR 235, 243. On occasions it has been suggested that the principle will only apply when it is counsel who has exceeded his authority: see, for example, Foskett The Law and Practice of Compromise 4th ed (1996) at 206 and 5th ed (2002) at 306-307. Yet there are cases which apply the principle to solicitors: see, for example, Welsh v Roe (1918) 118 LT 529, 531, Shepherd v Robinson [1919] 1 KB 474, 477, Lewis v Campbell Constructions Pty Ltd (1989) NSWLR 528, 536-537 and Insbury Pty Ltd v Craig [1990] 1 Qd R 309. The cases also show that "where the assistance of the court is sought or invoked to carry a compromise into effect which otherwise could not be enforced by the party relying upon it … [that] assistance may be refused on grounds not necessarily sufficient to invalidate a simple contract": Harvey v Phillips at 242-243. 5 I note that the applicants have not suggested that this case is like Hansen v Marco Engineering (Aust) Pty Ltd [1948] VLR 198 or Buseska v Sergio (1990) 102 FLR 157 where the court refused to disregard agreements made without authority because they could be sued upon in separate actions. Perhaps this is because these cases may be inconsistent with J R Bryant (Constructions) Pty Ltd v Daniels (Court of Appeal New South Wales, 20 March 1996, unreported). In any event it may be thought that where a costs order is made in one action it cannot be the subject of another. 6 On the other hand, the applicants did rely on Hansen v Marco Engineering, Wells v D'Amico [1961] VR 672, Buseska v Sergio, Cielo v M G Kailis Gulf Fisheries (1991) 104 FLR 189 and Waugh v H B Clifford and Sons Ltd to support the proposition that something more than a mistake made by a legal practitioner is required to trigger the court's discretion. As I read these cases, they do not support the applicants' position. In any event, here there is more than a mere mistake. 7 In the present case there is little doubt that Mr Cunningham exceeded his authority. The letter of instruction from Mr Condy tells Mr Cunningham that he must simultaneously settle both actions. In any case Mr Cunningham accepts that he acted beyond his authority. That should be sufficient to dispose of the present application in the respondents' favour. It would plainly be contrary to the interests of justice to allow the court to lend its assistance to an agreement which was made without authority. In practical terms, it is unclear whether the result would be to the respondents' benefit because, in due course, they may be required to pay more than $180,000 by way of costs. That, however, is a matter of indifference to the court. If I were to look at the position from the applicants' perspective, I would reach the same result. As I mentioned earlier, I think that Ms Meyer probably appreciated that the respondents did not wish to reach agreement on costs without also getting rid of the County Court action. She would have realised this from her previous dealings with Mr Cunningham and perhaps also from the fact that the respondents appeared to gain nothing by dealing with the cases separately. 8 There is one final matter I should mention. This application was heard last Friday, an hour or so before a meeting of the creditors of Mr Condy convened under Pt X of the Bankruptcy Act 1966 (Cth). The meeting was deferred for a short time so that Mr Condy could argue his case. (I now understand that the meeting has been adjourned to 29 January 2003). In virtue of the possibility that a resolution of the creditors under Pt X might result in this proceeding being stayed (as to which see s 228), I made the order which the applicants sought on the undertaking that it would not be entered and the understanding it would be recalled if I was of opinion that it should not be made. That is the decision which I have reached. Accordingly, I propose to recall the order and otherwise dismiss the application.